Real estate transactions are often backward in that a buyer makes a down payment on a home before he or she can order an inspection. To protect buyers in the event that an inspection reveals potentially costly or dangerous issues that the seller failed to disclose, most New York real estate contracts include inspection contingency clauses. Contingency clauses define the rights and responsibilities of each party and typically conform to state and local regulations. That said, contingency clauses almost always put the responsibility for repairs on the seller.
According to The Balance, it is often in the seller’s best interests to make the requested repairs, unless, of course, the buyer’s demands are unrealistic. Even if a seller chooses not to make repairs for one buyer, state law dictates that he or she must disclose the issues to all future potential buyers. A seller cannot conceal a home’s defects simply by canceling a transaction.
Some sellers choose to cancel a transaction, make the repairs and then relist the home for a higher price. This strategy rarely works. If the home is already priced correctly, upping the price to cover the cost of repairs will only serve to push the home squarely into the category of “overpriced.” Overpriced homes tend to sit on the market for months, if not years.
Even if a buyer agrees to make the repairs him or herself, the lender may not approve a home loan if the inspection reveals significant issues. Moreover, the lender may require a more in-depth inspection of the home’s structure, which may reveal even more costly issues. In many cases, lenders refuse to finance homes until all repairs are complete.
The bottom line for sellers is, if inspections reveal significant issues, pay to fix them. For buyers, The Balance recommends investing in an inspection as early in the transaction process as possible. Doing so can help to avoid accruing costly closing costs before the house is officially ready to sell.
You should not use this article as legal advice. It is for educational purposes only.